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Sunday, 6 April 2014

KARACHI: The State Bank of Pakistan (SBP) believes that Islamic finance is a better alternative to the conventional banking and is one of the fastest growing segments of the global as well as domestic financial sector.

Speaking in an event to mark 10 successful years of ‘Raast Islamic Banking’ programme of Bank of Khyber on Saturday, Deputy Governor SBP Saeed Ahmad said, “Given its global outreach, growing recognition as a prudent and stable system and ability to provide financial solutions for all business needs, Islamic finance is all set to establish itself as a better alternative to the conventional financial system having capacity to ensure financial stability and inclusive economic growth,” he said.

He said that global financial crisis in 2008-09 made western financial experts to look for an alternative under which the international financial system could overcome the weaknesses of the conventional system based on fixed predetermined return in the form of interest.

The search was for a system which leads to equitable treatment of all stakeholders under all circumstances. A lot of attention was focused on solutions which are not far from the Islamic financing where system allows fairness of return, sharing of risk and reducing income inequalities, he said.

Pakistan, he said, was amongst the first few countries that undertook the ambitious aim of Islamising the banking system. Significant efforts towards this end were made during the 1980s.

However, it went through a rough ride until some 12 years ago when the SBP allowed three types of Islamic banking institutions i.e. full-fledged Islamic banks; Islamic banking subsidiaries of conventional banks; and Islamic banking branches (IBBs) of conventional banks. Moreover, conventional banks having Islamic banking branches were also allowed to have Islamic banking windows in their conventional branches.

“Islamic banking industry, starting from almost a scratch in 2001, has acquired over 10 per cent share in the country’s banks branch system with over 1,300 branches across the country. Based on deposits, IBI’s share has increased to 12pc,” Mr Ahmad said.

He said the industry is growing at an impressive rate of over 30pc annually for last five years and the prospects of further strengthening this growth momentum in the near future are very bright.

He told the audience that last year the SBP allowed 3 more conventional banks to initiate Islamic banking operations, whereas two conventional banks had recently announced conversion into full-fledged Islamic banks over the next two to three. “These highly positive market sentiments give me optimism that the industry would easily surpass the strategic plan target of 20pc by 2020,” he added.

“We are also exploring the possibility and feasibility of establishing a Centre of Excellence for Islamic Banking and Finance in Karachi, and I will be discussing this proposal in my meeting with the heads of business and economics schools.

The Thomson Reuters Global Sukuk Index is at 112.04102 points, up from 112.02826 at the end of last month and 109.78969 at the end of last year. The Thomson Reuters Investment Grade Sukuk Index is at 109.26628 points, down from 109.26817 at end-March but up from 107.28036 at the end of 2013.

MALAYSIA - The Malaysian government will raise 2.6 billion ringgit ($797 million) via Islamic bonds on April 7 to finance new and existing housing loans held by government servants.

HONG KONG - Hong Kong lawmakers passed a bill in March that would allow the AAA-rated government to raise around US$500 million via sukuk.

BUMI ARMADA - Malaysian oil field services firm Bumi Armada said in March it planned to raise up to 1.5 billion ringgit in Islamic bonds, after it received approval from the securities commission.

MAYBANK - Maybank Islamic, the largest Islamic bank in southeast Asia, will set up a 10 billion ringgit subordinated sukuk programme, ratings agency RAM ratings said in March.

SAUDI INVESTMENT BANK - Saudi Investment Bank has picked the investment bankingarm of Riyad Bank to arrange a subordinated Islamic bond issue, banking sources said; one said the transaction could take place before Ramadan.

GULF FINANCE HOUSE - Bahrain-based Gulf Finance House plans to issue convertible sukuk worth up to $500 million to restructure liabilities, develop projects and fund possible acquisitions, subject to shareholder and regulatory approval, it said in March; no time frame was given.

LUXEMBOURG - A proposed bill in Luxembourg would allow securitisation of three properties for a sovereign sukuk issue worth 200 million euros ($275 million).

IJM CORP - Malaysia's IJM Corp is finalising plans to issue a benchmark sukuk in April; one of the final steps will be the establishment of a 3 billion ringgit sukuk programme, bankers said in March.

BANK MUSCAT - Bank Muscat received shareholder approval in March for Meethaq, its Islamic subsidiary, to set up its first sukuk programme worth 500 million rials ($1.3 billion), allowing domestic and international issues. Shareholders also approved the establishment of a 1 billion Saudi riyal ($267 million) domestic sukuk programme for the bank's Saudi branch.

OMAN - Omani central bank executive president Hamood Sangour al-Zadjali said in March that the government would probably make its first sovereign sukuk issue at the end of this year.

ALHOKAIR - Saudi Arabian retailer Fawaz Abdulaziz Alhokair aims to sell its debut Islamic bond in the next 12 months, a company official said in March.

FIRST GULF BANK - Abu Dhabi's First Gulf Bank, the third-largest bank by assets in the United Arab Emirates, plans to raise up to 3.5 billion ringgit with Islamic bonds in Malaysia, RAM Ratings said in March.

ISLAMIC DEVELOPMENT BANK - The Jeddah-based Islamic Development Bank aims to issue its first short-term sukuk this year, a senior executive said in February.

PUBLIC BANK - The sharia-compliant arm of Public Bank, Malaysia's third largest lender, submitted a proposal to the central bank in February for a 5 billion ringgit Basel III-compliant Islamic bond programme.

SOUTH AFRICA - The South African Treasury said in February that it was confident of issuing its first sukuk in the coming few months.

DANAINFRA- Malaysia's DanaInfra Nasional, created by the finance ministry to raise funds for the country's largest infrastructure project, may issue and list on the stock exchange this year as many as two Islamic bonds worth 100 million ringgit each, an official with the bourse said.

KILER REIT - Turkish real estate investment trust Kiler GYO plans to issue a five-year sukuk worth at least $100 million in the second half of this year, parent company Kiler Holding's chief financial Officer Kaan Aytogu said in February.

BRITAIN - The finance ministry said in January it had appointed HSBC and law firm Linklaters as advisors to assist in its planned debut issuance of sukuk; Prime Minister David Cameron said last year that the government was working on a plan to issue around 200 million pounds ($330 million).

SENEGAL - The country's 2014 issuance programme includes its first $200 million sovereign sukuk planned for April, officials said in January.

ACWA - Last December, Saudi Arabia-based water and power project developer ACWA Power said it had raised a 1.77 billion riyal Islamic loan from four local banks to help finance investments including acquisitions and act as a bridge to a sukuk issue in 2014.

ADB - The Asian Development Bank said in December that it was considering an Islamic bond issue as early as in 2014.

SABIC - Saudi Basic Industries Corp (SABIC), the world's biggest petrochemicals group, said in May 2013 it planned to issue sukuk late in 2013 or in 2014 to fund coming projects; it was too early to give the size, a company official said.

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